Jottings By An Employer's Lawyer

Thursday, December 17, 2009

A Pre-Cursor to the Arbitration Fairness Act Takes Another Step


The Arbitration Fairness Act, which would ban the practice of making agreement to arbitration a condition of employment, is not likely to be voted on until sometime in the spring of 2010. However, those in favor of arbitration in the workplace can not be pleased by the survival of the Franken amendment to the Defense Appropriations Bill which bans such agreements by defense contractors.

After passing the Senate in October (the day before I was testifying in a Senate Judiciary Committee hearing involving arbitration where Senator Franken took the lead) it has now passed not only the House, but survived a conference committee. Franken Rape Amendment Included In Defense Spending Bill.

The amendment extends not only to first tier contractors, but also to sub-contractors, if either of them exceed $1,000,000. Although much of the publicity surrounding the Amendment has been focused on a rape that occurred against an employee who had an arbitration agreement, by extending its coverage to any claim under Title VII it is much broader than cases involving sexual assault.

Here is the language of the Franken Amendment that survived conference :
SEC. 8116. (a) None of the funds appropriated or otherwise made available by this Act may be expended for any Federal contract for an amount in excess of $1,000,000 that is awarded more than 60 days after the effective date of this Act, unless the contractor agrees not to:

(1) enter into any agreement with any of its employees or independent contractors that requires, as a condition of employment, that the employee or independent contractor agree to resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention; or

(2) take any action to enforce any provision of an existing agreement with an employee or independent contractor that mandates that the employee or independent contractor resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress,false imprisonment, or negligent hiring, supervision, or retention.

(b) None of the funds appropriated or otherwise made available by this Act may be expended or any Federal contract awarded more than 180 days after the effective date of this Act unless the contractor certifies that t requires each covered subcontractor to agree not to enter into, and not to take any action to enforce any provision of, any agreement as described in paragraphs (1) and (2) of subsection (a), with respect to any employee or independent contractor performing work related to such subcontract. For purposes of this subsection, a ‘‘covered subcontractor’’ is an entity that has a subcontract in excess of $1,000,000 on a contract subject to subsection (a).

(c) The prohibitions in this section do not apply with respect to a contractor’s or subcontractor’s agreements with employees or independent contractors that may not be enforced in a court of the United States.

(d) The Secretary of Defense may waive the application of subsection (a) or (b) to a particular contractor or subcontractor for the purposes of a particular contract or subcontract if the Secretary or the Deputy Secretary personally determines that the waiver is necessary to avoid harm to national security interests of the United States, and that the term of the contract or subcontract is not longer than necessary to avoid such harm. The determination shall set forth with specificity the grounds for the waiver and for the contract or subcontract term selected, and shall state any alternatives considered in lieu of a waiver and the reasons each such alternative would not avoid harm to national security interests of the United States. The Secretary of Defense shall transmit to Congress, and simultaneously make public, any determination under this subsection not less than 15 business days before the contract or subcontract addressed in the determination may be awarded.
The bill now goes back to the Senate where passage is expected before Christmas.

Hat tip to the Washington Labor & Employment Wire for their post on the appropriations bill.

Update (12/21/09): President Obama signed the law over the week end. Obama Signs Into Law Restriction on Arbitration Clauses.

Update (12/30/09):  If you check the comments below, a reader has pointed out that I may have read the Franken Amendment too broadly when I suggested it may cover any Title VII claim. I certainly can see the point, and actually think hope he or she is correct.

However, I am apparently not the only one to read it broadly (or at least write about it that way). The
Alaska Employment Law blog's post, The Breadth of the Franken Amendment, quotes from the Legislative & Public Policy Direct of NELA:
Importantly, it bars contractors and subcontractors that are funded by 2010 appropriations not only from entering into pre-dispute “agreements” with their employees that require arbitration of Title VII claims, but also from ENFORCING any such agreements that already exist. It also appears to apply to such “agreements” with ANY of the contractors’ employees, anywhere, not just those whose jobs are funded by defense appropriations.
My guess is that defense contractors will put the wording from the Franken amendment "as is" into their agreements, and then when someone seeks to enforce arbitration of a Title VII claim with no relationship to "sexual assault or harassment" and we will get our first determination that matters. Even if the commentator below is correct about Title VII being limited, it seems a little harder to apply that reasoning to "negligent hiring, supervision or retention."  ]

Legislative drafting is obviously not an easy task. Not that they need it, but it definitely provides job security to judges.

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Comments:
Is this law meant to prohibit arbitration of all Title VII claims, or only those are "related to or arising out of sexual assault or harassment"? To me, the language is ambiguous, and the lack of a comma between "title VII of the Civil Rights Act of 1964" and "any tort related to or arising out of sexual assault or harassment" suggests that the only claims under Title VII that are covered are those "related to or arising out of sexual assault or harassment." Put otherwise, I think it can be argued that "related to or arising out of sexual assault or harassment" modifies "any claim" rather than "any tort." Or am I just being a wishful thinker? I don't know the legislative history of the amendment, other than that the case which promoted it involved both Title VII and tort claims arising from a sexual assault.
 
I think Jim has a good point. I am not sure on the legislative history, but given the arguments that were being made by Senator Franken and others, you could certainly make an argument that was the only evil it was dealing with was sexual assault. It would also explain why you would still be allowed to require arbitration of claims under other statutes such as FMLA, ADA, FLSA and not run afoul of the Amendment. Hopefully I was guilty of too much cynicism in thinking that Congress was trying to do more than it actually did. And that Courts will read the statute closer than I did on first blush.
 
One more thought or question, Michael. Suppose a collective bargaining agreement requires arbitration of whatever claims the Franken Amendment is meant to cover (which, as you discussed above, might be read as all Title VII claims), and does so in a way that passes muster under the Supreme Court's Pyett v. 14 Penn Plaza case from last term. Does the Franken Amendment apply, given that it covers obligations to arbitrate found in an "agreement with an employee or independent contractor," but says nothing about an agreement with a union? I have not seen anything to indicate whether this was considered in drafting the amendment.
 
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